French building materials firm Lafarge's hostile bid for British cement producer Blue Circle has been rejected.

The company said only 24.53% of shareholders had accepted its 450p a share bid, taking total acceptances, including its own existing stake, to 44.52%.

News of the rejection saw shares in Blue Circle fall 5.4% or 22.75p. Shares in Lafarge were also lower in Paris trading.

Blue Circle successfully defended itself against Lafarge's bid by promising an £800m share buyback as well as plans to refocus its business.

'Clear message'

Blue Circle chief executive Rick Haythornthwaite said the rejection sent "a very clear message to the market that these sorts of industries are not for sale on the cheap."

Rick Haythornthwaite: sipping champagne

He said he would celebrate with a few glasses of champagne before tackling the job of delivering Blue Circle's promises to shareholders.

Lafarge chairman and chief executive Bertrand Collomb said he was disappointed, but the company remained determined to grow by acquisition.

"Lafarge remains committed in its strategy to expand by acquisition as and when suitable opportunities are available and where such acquisitions can be executed in a way which creates value for Lafarge."

He said the company was mulling over what to do with its stake and an option on a 9.6% stake owned by Dresdner Kleinwort Benson.

Waiting game

Some analysts said Lafarge could wait for Blue Circle's share buyback to increase the percentage of its holdings to nearly 39%.

Under UK rules, Lafarge could make another bid in a year and a day.

In the meantime, Blue Circle will be under pressure to deliver on its promises to cut costs, get rid of underperforming assets and improve growth.

"Either Blue Circle will deliver big time or they won't and if they don't, Lafarge will re-bid from a platform which by then, won't leave them all that much to do," said Teather and Greenwood analyst David Taylor.

Global giant

Lafarge is active in 65 countries and employs 71,000 people worldwide, with a turnover of $10bn.

The firm, with a history going back more than 160 years, wants to create a global giant in each of its five product groups, cement, aggregates and concrete, roofing, gypsum and speciality products.

It has already moved into the UK market by purchasing building materials group Redland.

Blue Circle, Britain's largest cement producer, has been hit by the consolidation in the building materials industry and losses in Malaysia arising out of the Asian crisis.